The U.S. real estate market is still missing millions of homes despite a recent surge of new construction.
A new Realtor.com analysis found that the housing market is still short by 7.2 million homes as of December 2023, which grew from a 6.5 million gap recorded at the end of 2022. The shortage in single-family housing starts can be attributed to "a decade of underbuilding relative to population growth."
"The U.S. is in a long-term housing shortage with the construction of new homes failing to keep pace with a growing population. While a recent uptick in new construction has the potential to alleviate the historically low level of homes for sale on the market today, it's going to take some time to close the gap," Danielle Hale, Chief Economist at Realtor.com, said.
In 2023, homebuilders began construction on 947,200 single-family homes and 472,700 multi-family homes. This brought the overall housing starts total to 14.7 million homes. At least 10 million of those were single-family homes.
How Long Would It Take To Close the Gap in Housing?
How long it could take to close the gap depends on multiple factors. If only single-family homes were taken into consideration, Realtor.com noted that the gap could be closed within four or five years so long as the rate of housing triples.
"It will require sustained new construction activity, and it will likely continue to be an issue for the years to come because it's just not likely that new construction activity is going to pick up to that level," Hannah Jones, senior economic research analyst for Realtor.com, told Business Insider.
In addition to tripling construction rates, Jones said there would need to be demographic or technological shifts. This means either the aging population would need to put their homes up for sale, or construction companies need to embrace newer, better technology to build more efficient and less expensive homes.
The shortage in the housing market has led to soaring costs of homeownership. A recent research found that homebuyers today would need to make over $106,000 to afford a house comfortably. That's 80% higher than the annual household income needed in January 2020, before the COVID-19 pandemic.
